Geo-Arbitrage: Using Our Hub and Spoke Model to Drive Down Costs
Complex litigation tends to be very expensive. The attorney’s fees for commercial and intellectual property disputes routinely climb into the six to seven figures. The industry conversation among firms and clients on how to address the high cost of litigation tends to center on how to use alternative fee arrangements (“AFAs”) such as flat fees instead of the billable hour.
In our view, the (slow) move towards AFAs is important and long overdue. But we think this move is insufficient because it does not address the reason why litigation costs are so high in the first place. AFAs and billable hours must both be high enough to cover the law firm’s costs; i.e., AFAs and billable hours will always be higher than the costs of operating the firm.
Our simple thesis is this: litigation costs are high because the “means of production” of complex litigation services are located in expensive locations.
The connection between location and cost is easy to state: Most AmLaw 100 offices are based in big cities both because it is both easier to find large collections of legal talent and because larger businesses tend to locate in big cities. The two biggest costs for a law firm are talent and real estate. In a big city talent and real estate tend to be very expensive and big firms tend to need lots of both. As a consequence, the cost to firms to acquire their means of production are high.
Put another way: High fixed costs = high law firm prices.
In other industries, innovators figure out how to drive down prices while improving service quality. That generally has not happened in the market for complex legal services. At Hilgers Graben we have worked to disrupt the old business model through our hub and spoke system.
The most important quality of legal representation is the lawyer. It is not the real estate, not the artwork, not the cafeteria, not the hundreds of other things that big law firms spend money on.
Our hub was built with that in mind. Every one of our litigators who works in our hub office worked at a big law firm and/or has a similar background to a big firm attorney. Our lawyers graduated from top schools, worked for federal district and appellate judges, worked at top law firms, and in many cases did all three.
Here are some of the bios of these attorneys:
· Mike Hilgers – firm founder, Fifth Circuit clerk, Fish & Richardson, law review editor, University of Chicago Law School
· Mary Ann Novak – Tenth Circuit clerk, Irell & Manella, law review, Stanford Law School
· Carrie Dolton – DLA Piper (San Diego), law review, San Diego University School of Law
· Trent Tanner – Third Circuit clerk, Wheeler Trigg and Wilmer Hale, law review, University of Chicago Law School
· Bub Windle – Paul Hastings, University of Virginia School of Law
· Jackson Rudd – University of Chicago Law School
The difference? Our “hub” is in Nebraska. Why Nebraska? First, many of our lawyers happen to be from Nebraska, including firm founder Mike Hilgers. Second, because our model is based on price disruption via lower costs the following apply to our hub office:
· Real estate is far less expensive. Average price/sq foot in New York City is $70-90. In Nebraska? $10-15. We also use far less of it. An average firm in New York has 800 square feet/lawyer; we use a fraction of that.
· Top legal talent is less expensive. First-year starting salaries in Los Angeles and other big cities for a first-year attorney? $190,000. To maintain the same standard of living in Nebraska? $120,000.
By using geo-arbitrage to curate our legal talent in our Nebraska hub, we slice the two largest costs of owning a firm —the talent and real estate— by over half, with the same quality of lawyer found in the big firms The savings go to our clients.
We supplement our Nebraska hub with “spoke” locations in a handful of larger cities—currently Denver and Dallas, with more to come in 2019. This hat helps us ensure we have attorneys on the ground to help our clients in those locations. Here are examples of our lawyers at two of our spoke cities:
· Andrew Graben – NYU Law School, partner, Fish & Richardson
· Sterling Miller – Washington University School of Law, law review, former general counsel of Sabre Corporation, Travelocity.com, and Marketo Inc.
· Kris Long – University of Texas Law School, Fish & Richardson
· Paul Gwilt – University of Chicago Law School, former partner, Kutak Rock
· Jen Erickson Baak – Seventh Circuit clerk, Winston and Strawn, law review, University of Iowa College of Law
· Kary Klismet – Wheeler Trigg, law review, University of Iowa College of Law
On top of these locations, we have layered our nationwide group of discovery counsel, known as our Edge team. This group has handled some of the most complex and difficult discovery projects in the country. They often partner with a big law firm but delivering the review to the client at a fraction of the cost of a traditional e-discovery review—with better quality of results.
The Power of the Hub and Spoke
A common question is whether our firm is limited in its reach, i.e., if you are in Nebraska can you only handle Nebraska cases? In a word—no! Our reach is nationwide. In the last 5 years we have handled cases in Nebraska, Texas, Colorado, Delaware, Kansas, Oregon, and California, to name but a few jurisdictions.
Our hub and spoke network is closely connected and works seamlessly together. We use a variety of technologies—including video conferencing, secure cloud-based sharing technologies—to sync our teams together. And for our clients, we travel to see them anywhere in the country for meetings as if we were located in their home city—and pay for the travel on our dime.
If you want to learn more about our hub and spoke system and other ways to drive down your litigation and e-discovery spend, call or email us today.
Hilgers Graben PLLC
About Hilgers Graben PLLC
Hilgers Graben is a nationwide litigation boutique specializing in complex commercial and intellectual property litigation and discovery counsel services. The firm uses geo-arbitrage and innovation to provide superior litigation and discovery counsel services while driving down costs for its clients. The HG EDGE discovery counsel team has pioneered unique techniques and process improvements to dramatically drive down the cost of discovery.